Eaton delivered an excellent quarter on Friday, reinforcing our view that the AI data center buildout remains alive and well. The power management company also raised its sales outlook to reflect a bigger-than-expected contribution from a recent acquisition. Revenue for the second quarter ended June 30 increased over 21% year-over-year to a record $8.53 billion, ahead of the LSEG compiled analysts’ consensus estimate of $8.13 billion. Adjusted earnings per share (EPS) rose nearly 7% to $3.15, a second-quarter record. That’s better than the $3.07 expected, according to LSEG. Shares rose on the release, but fell from their highs of the day as oil and bond yields advanced. ETN 1Y mountain Eaton 1-year stock performance Bottom line Eaton investors had good reason to be concerned heading into earnings. As of Wednesday’s close, shares were roughly 17% below their late June highs, swept up in the heavy selling across the AI hardware trade. In addition, one of its rivals, Vertiv , issued a disappointing quarter this week that it blamed on temporary supply chain challenges, which added to Eaton’s declines. But Eaton ripped higher in Thursday’s session as the AI trade rallied after a levered hedge fund was forced to unwind some of its positions. That improved sentiment extended into Friday, but only modestly. The onus was still on Eaton to show that the recent sell-off was unwarranted. The company, whose electrical equipment is used inside data centers and across the grid, certainly delivered. Demand for Eaton’s best-in-class electrification and power solutions is increasing, and its acquisition of Boyd Thermal, completed in March, adds liquid cooling to the mix. During the conference call with investors, management raised its estimates for Boyd’s sales for the year to $1.8 billion from the $1.7 billion previously forecast. The addition is now expected to contribute $1.5 billion to the topline, up from $1.4 billion previously. CEO Paulo Ruiz said he would be “shocked” if the company doesn’t overdeliver on that raised guidance, noting it beat the second-quarter estimate by 20%. One competitive advantage, Ruiz said, is Boyd’s size. As the market leader for liquid cooling, it can scale much quicker and more efficiently than its smaller peers, he said. Boyd “cut their teeth; they developed their pedigree in aerospace,” Ruiz said. “So it is very, very stringent conditions technically, where failure is not an option. So they bring that DNA to the data center environment.” That added exposure to the data center, both strategically and financially, couldn’t have come at a better time. Total U.S. data center backlog has grown to 307GW, or 15 years of backlog at 2025 build rates, up from 12 years in our last update. Only roughly 20% of this backlog converts near term. The majority of deliveries will translate into revenue in the 2028 and beyond timeframe. That’s a positive because it means revenue is more predictable further out into the future, Ruiz said. While the data center is clearly powering the growth, with the team calling for double-digit end market growth in 2026, the company sees “robust demand” across the company’s various end markets, including electric vehicles and commercial aerospace. Why we own it Eaton has exposure to several important megatrends like electrification, energy transition, and infrastructure spending. Data centers use the company’s power management solutions and electrical equipment to keep up with the heightened demand for more AI computing power. Competitors : Parker-Hannifin , DuPont and Honeywell Most recent buy : May 5, 2026 Initiated : Nov. 15, 2023 In June, Eaton also moved one step closer to fulfilling its pledge to divest its mobility division. The company agreed to combine this lagging business with auto parts manufacturer Dana in a deal that values the unit at $5.1 billion. The move not only removes a drag on Eaton’s earnings growth but also positions the company to benefit from higher-margin businesses that support the data center buildout. Given the strong results and management’s upbeat outlook, we reiterate our $450 price target. However, we are also maintaining a 2 rating; with the stock already up nearly 8% Friday, we will look for a better opportunity to upgrade and buy. Commentary On a combined basis, Eaton’s electrical businesses delivered 18% organic growth and 27% total growth. Margins were 24.5%, and on a rolling 12-month basis, orders accelerated to 38% year-over-year growth, leading to an overall book-to-bill of 1.2x for the electrical sector and a 43% increase in the backlog. (Anything above 1x indicates orders are being received faster than they can be delivered, leading to backlog growth.) Electrical Americas posted revenue and operating profit records, with 18% organic growth. On the call, CFO David Foster said demand is accelerating, with the pipeline of negotiations up 60% year-to-date versus the year-ago period. On a rolling 12-month basis, orders increased 41%, leading to a book-to-bill of 1.3x. The backlog ended the quarter up 33% year over year at $3.8 billion. Looking at the segment’s profit margin, we got 190 basis points of sequential expansion, thanks to strong execution as the team ramps up capacity, with Ruiz commenting on the call that the team expects further expansion in the back half of the year. Electrical Global delivered record revenue and operating profit. Sales were up 44% year over year, consisting of 18% organic growth, a 25% tailwind from the Boyd acquisition, and a 1% benefit from foreign exchange. Order growth of 33% on a rolling 12-month basis led to 103% year-over-year backlog growth to close out the quarter. Aerospace sales missed estimates but reached an all-time high for the company. Operating profit was essentially in line, aided by better-than-expected margin performance. On a rolling 12-month basis, the book-to-bill was 1.2x, leading to 28% year-over-year backlog growth. The 13% revenue growth was the result of a 7% organic increase compounded by a 6% tailwind from acquisitions Products here include main engine fuel pumps for commercial aircraft and hydraulic power packs for business jets. Mobility , which is the combination of the prior vehicle and eMobility segments, reported in-line revenue, but its operating profit and profit margin were slightly below expectations. A 2% organic revenue decline was offset by a 2% benefit from foreign exchange. Eaton intends to divest this unit, the company’s smallest, in the first quarter of 2027, via a Reverse Morris Trust transaction, which helps Eaton avoid a large corporate tax bill that an outright sale of the business might have triggered. This unit has the worst organic growth and profit margin profile of all the operating segments, so management expects an immediate benefit to overall organic sales and profitability once the transaction is finalized. Guidance Eaton raised its full-year outlook for organic growth as well as the midpoint of its adjusted EPS forecast. It now expects organic growth of 11% to 13%, up from 9% to 11% and above the 10.5% the Street was expecting, according to FactSet. Margins are still expected to be 24.1% to 24.5%, exceeding the 24.1% FactSet consensus estimate at the midpoint. Adjusted EPS is expected to be in the range of $13.40 to $13.60, up from $13.05 to $13.50. That’s better than the $13.24 per share estimate, according to FactSet. Along with the improved full-year view, the third (current) quarter outlook came in better than expected. Organic growth is projected to be in the range of 13.5% to 15.5%, surpassing the 11.7% consensus estimate. Segment margins are expected to be between 24.6% and 25%, above the 24.5% estimate at the midpoint. Adjusted EPS is expected to be in the range of $3.46 to $3.56, which beats the $3.50 estimate at the midpoint. (Jim Cramer’s Charitable Trust is long ETN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
